Businesses must learn to battle back against 'patent trolls'

Since we started tending crops and raising animals, we moved away from our nomadic lifestyles and settled in one place, essentially inventing the real estate industry. The procedures for buying and selling land have changed, but the basic idea has gone unchanged. Now, millennia later, nearly one million Realtors across the U.S. contribute to roughly 5 million home sales, boosting America’s economy and helping to secure the investments of countless Americans

The Alabama real estate industry’s success is due in large part to Realtors understanding the need to embrace new technologies by Internet companies for their clients—both buyers and sellers—who expect and demand reliable, mobile, and convenient access to information. The industry relies on Internet companies to provide multiple platforms for customers to make reliable choices. Unfortunately, in using these new technologies, Realtors and Internet providers have unknowingly exposed themselves to legal attacks, from patent trolls – who make no products or services, demand licensing fees and threaten burdensome, frivolous litigation.

While the Alabama Realtors are simply using Internet technologies to help do their business better, patent trolls are aggressively pursuing litigation over alleged patent infringement. For example, one such major case – over map-based web searching – resulted in a $7.5 million settlement. From large settlements to individual demand letters, patent trolls cause Realtors to divert resources away from job creation and investment in new technologies that enhance the real estate experience.

Patent trolls first targeted major tech companies, but they have set their eyes on Realtors, internet companies and several other entrepreneurs and small business owners that help create jobs in our communities. Companies in every business from the hotel to the printing to the coffee shop industry have been forced to face patent-infringement lawsuits from trolls. Litigating a single case can cost more than a million dollars. In 2012, patent trolls cost the economy $80 billion in litigation costs alone. In addition, companies often settle just to save themselves the hassle, regardless of whether the case is legitimate or not.

These lawsuits are not only a waste of money and time, but discourage companies from innovating or using new technologies to better serve their customers for fear of being sued.

Patent trolls are a problem for startups and established companies alike, and recent cases have shown that no one is safe from their targeted extortion tactics. Congress, and more specifically the Senate, must act to stop them now.

Fortunately, reform is already under way. Late last year, the House of Representatives passed the Innovation Act, which includes a number of key reforms. Right now, the Senate is working on its own legislation to fix the problem.

Supporters of patent reform have suggested a number of different proposals to fix the patent system. There’s no one-size-fits-all solution to the problem of patent trolls, but there are a few important provisions that would help protect companies from these lawsuits.

One of these is to make the tactics of the patent trolls more transparent. Before filing lawsuits, patent trolls often send letters to companies threatening litigation or demanding a licensing fee. These letters are often confusing, and the patent owners will hide behind layers of shell companies. Requiring these companies to disclose who is behind these letters will help their targets better evaluate whether these claims are valid or not.

In the cases where patent trolls take businesses to court, we need to encourage companies to fight back. If a business fights a patent lawsuit and wins, it will still lose millions of dollars in lawyers’ fees. Patent trolls know this, and often offer settlements just below the cost of litigation to entice businesses. To fight this practice, we need to ensure that fee-shifting is part of any patent reform bill. Fee-shifting would require patent trolls that file lawsuits and lose to also pay the defendant’s lawyers’ fees. Such a change would give companies an incentive to fight trolls instead of accepting settlements.

The final legislation also needs to address patent quality. Many of the patents at the heart of these lawsuits are overly broad or vague and should never have been issued in the first place by the U.S. Patent Office. Patent reform must put procedures in place to ensure that overly broad or vague patents like these are no longer issued, and those in circulation aren’t used in lawsuits. The best way to fix this problem is to make sure we improve the quality of the patents being issued.

Too many Realtors, who are mostly self-employed small businesses, have found themselves targets of patent trolls’ lawsuits. For established businesses like the Internet companies that Realtors rely on, these lawsuits mean money and productivity lost. For entrepreneurs, they can be catastrophic.

Members of the Senate from both parties have acknowledged the need for patent reform. Every day that the Senate waits to act, patent trolls continue to suck millions of dollars out of the economy, harming businesses, their employees and, ultimately, consumers. If we want to protect the innovation and technology that helps improve the marketplace, we need to make patent reform a reality.

Pam Segars-Morris, President of the Alabama Association of Realtors, and Michael Beckerman, The Internet Association President and CEO.